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Porter County first enacted a county option income tax in 2002, following the Bethlehem Steel bankruptcy and the fiscal crisis that resulted for local government units. The Indiana Legislature offered Porter County taxing units a no-interest "bail out" loan, under the condition that Porter County adopt a county option income tax. The County Economic Development Income Tax (CEDIT) was then established at a rate of .0025 (.25%).

In 2005, Porter County amended the CEDIT rate after Indiana lawmakers established the Northwest Indiana Regional Development Authority (RDA). State legislation allowed Porter County to pay its $3.5 million dues to the RDA with a new income tax that would also include property tax relief for homeowners.

Effective July 1, 2005, the CEDIT rate was set at .005 (.5%).

All Indiana counties now have adopted at least one type of county option income tax, and Porter County's rate is among the lowest. Of the 92 counties, six others have a rate equal to or less than Porter County's. As shown in the chart below, most Indiana county income tax rates are in the range of 1.1% to 2%.

Source: State Budget Agency. Data reflect the most recent rate changes for 2016.

Changes in store for County Income Taxes

A bill that passed the Indiana Legislature in 2015, H.B. 1485, calls for a transition in the local option income taxes available to counties. Instead of having different tax options -- such as CEDIT or CAGIT -- counties will transition to a single income tax with three different rate components. The transition is intended to take effect in 2017.